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Obama to Announce Housing Plan on Wednesday

DS News

White House officials said that President Barack Obama is scheduled to unveil the administration’s new housing and mortgage relief program on Wednesday during a speech in Phoenix, Arizona, one of the areas hardest hit by the nation’s foreclosure epidemic.

Provided the details of the program are fleshed out by mid-week, they will come much earlier than the March 6th timeframe given by Treasury Secretary Timothy Geithner last Tuesday. The urgency surrounding the plan is likely due to pressure from lawmakers, who told Geithner at a congressional hearing they needed a “detailed plan in clear terms” of how the administration planned to proceed.

However, according to a Wall Street Journal report over the weekend, the Treasury Department is still investigating as many as 10 ideas to help deal with the housing crisis, and has yet to settle on any one approach. The administration, though, has already said it will spend at least $50 billion to assist struggling homeowners.

One idea being considered, officials told the Journal, would reduce mortgage payments by cutting interest rates, the cost of which would be shared by the government and mortgage servicers. As part of a new national standard for modifying loans, the plan would be made available to homeowners who are still current on their payments but are in danger of defaulting, the Journal said.
Currently, government enterprises Fannie Mae and Freddie Mac have targeted their streamlined loan modification program at borrowers who are at least 90 days delinquent.

The Journal said that another idea being considered is refinancing for homeowners who are underwater, meaning they owe more than their houses are now worth. Right now, negative property equity and the continuing decline of home values makes this option more risky for lenders, keeping many homeowners from taking advantage of the current market’s lower mortgage rates.

According to an Associated Press report, the new plan is likely to include hefty payments designed to encourage lenders to lower mortgage rates or even reduce principals. A Democratic Senate aide told AP that such an idea has become “attractive” to Obama officials because it is expected to carry a much smaller price tag than a government buy-up of loans linked to mortgage securities.
The administration is also expected to endorse a plan to allow judges to modify mortgages during bankruptcy proceedings, the Journal reported. Such “cram-down” action has been strongly opposed by lenders, mortgage servicers, and investors.

Several large banks, including JP Morgan Chase, Bank of America, and Citigroup, as well as mortgage giants Fannie Mae and Freddie Mac announced foreclosure moratoriums last week, hoping to limit the impact to homeowners as they wait for the administration’s plan to address the problem.

In an attempt to soften heightened expectations for the program, White House Press Secretary Robert Gibbs said Friday, “It’s not intended to be measured by one day’s market score keeping, but instead to ensure that the 10,000 Americans each day that have their homes foreclosed on, and the millions more that are barely getting by, are protected.”

Meanwhile, in Rome over the weekend, Secretary Geithner tried to rally international support for the Obama administration’s financial recovery plan at the Group of Seven (G7) meeting of economic leaders from the world’s largest nations. Geithner told the G7 finance ministers and central bank governors, “You’ve seen the new administration in the U.S. move with unprecedented speed, not just to work with the Congress to authorize new resources to help strengthen the financial system, but to move very, very quickly to put in place this very powerful economic recovery plan.”

Source: DSNews.Com Default Servicing In Print and Online – 2/18/2009

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